Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

BERMAN v. THOMSON

May 14, 1968

JERI J. BERMAN, PLAINTIFF,
v.
ALBERT W. THOMSON, A.D. MARTIN, M.J. COEN, RALPH A.L. BOGAN, JR., EDWARD D. BOSHELL, FRANCIS C. WOOLARD, J. EARLE MAY, HERBERT F. KORHOLZ, AMERICAN GYPSUM COMPANY, A NEW MEXICO CORPORATION AND THE SUSQUEHANNA CORPORATION, A DELAWARE CORPORATION, DEFENDANTS, MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, A MASSACHUSETTS CORPORATION, STATE MUTUAL LIFE ASSURANCE COMPANY OF AMERICA, A MASSACHUSETTS CORPORATION, AND THE FIRST NATIONAL BANK OF BOSTON, A NATIONAL BANKING ASSOCIATION, ADDITIONAL PARTY DEFENDANTS AS OF MARCH 15, 1966.



The opinion of the court was delivered by: Marovitz, District Judge.

MEMORANDUM OPINION

Motion of Defendant First National Bank of Boston to Dismiss.

This is a derivative action, brought on behalf of the Susquehanna Corporation, against certain of its directors and others, to recover for the issuance of a proxy statement alleged to be in violation of Section 14(a) of the Securities Exchange Act of 1934 (15 U.S.C. § 78n), and Rule 14a-9 thereunder.

In essence, the plaintiff, a shareholder of Susquehanna, asks this Court to set aside an Agreement of Merger under which American Gypsum Company (Gypsum) would be merged into Susquehanna, and to enjoin any action hereafter to be taken pursuant to it, and to set aside any action taken under it during the pendency of these proceedings. The gist of plaintiff's aggrievement is contained in Paragraph 26 of the complaint, where she avers:

  "If the proposed merger is consummated, the
  shareholders of SUSQUEHANNA will cease to be
  shareholders of an almost debt free company with
  excellent potential, and will become the victims
  of this merger which will transform their company
  into a debt burdened company with massive debt
  charges and maturities as demonstrated by the
  proxy statement. The gross book value of GYPSUM is
  offset very largely by such debt burdens, which
  will now be shifted to SUSQUEHANNA, endangering
  the investment of every shareholder."

More specifically, as of June 30, 1965, Gypsum had assets of $22,200,000. In addition, it had long term debt totaling $12,517,000, of which $6,000,000 consisted of long-term unsecured notes held by insurance companies, and $6,450,000 consisted of a collateral note from the First National Bank of Boston (Boston Bank) which was secured by 430,000 shares of Susquehanna stock owned by Gypsum.

The specific violations of Section 14 urged by plaintiff need not be considered here, since they are not relevant to the issue at bar, a motion to dismiss by defendant Boston Bank.

Plaintiff alleges, in the Third Amendment and Supplement to the Complaint, that the above mentioned collateral note had a maturity date of July 15, 1966, but that there was an oral understanding between Gypsum and the Bank that if Gypsum were merged into Susquehanna, the maturity date would be extended to December 31, 1966. It is plaintiff's position that since the pledged Susquehanna shares are "grossly insufficient" to pay the note, assets of Susquehanna other than those attributable to Gypsum will be used to pay all or a substantial part of said note, unless this Court enters a restraining order. Accordingly, the bank is added as a defendant for the purpose of requiring it to account and repay to Susquehanna any of the latter's assets received in payment of, or as collateral for, any of Gypsum's obligations.

The Bank moves to dismiss on the grounds that: (1) it is not subject to the jurisdiction of this Court under Sec. 27 of the Exchange Act, 15 U.S.C. § 78aa; (2) although served with process in Massachusetts, it is not subject to process from this Court, and; (3) as a National Banking Association, it may be sued only in Massachusetts, where its home office is located, under the special venue provision of 12 U.S.C. § 94.

We believe that we are without jurisdiction as to the Boston Bank and consequently they must be dismissed as party defendants.

Plaintiff concedes at page five of her memorandum that the Bank was not a party to the alleged violation of Section 14. She states:

  "In the present action it is not charged that the
  bank was a party to the fraud (in the statutory
  sense of non-disclosure). No damages are sought
  from it because of any violation of the Act by
  itself * * *"

However, she urges that our jurisdiction over the Bank is "ancillary" to the other charges under that section, and as such enables her to make use of the nationwide service of process provided in Section 27 of the Exchange Act. We respectfully disagree.

Plaintiff cites no authority for her position that the doctrine of ancillary jurisdiction should apply to the Bank in this action. Certainly no such authority is indicated in Note, "The Ancillary Concept and the Federal Rules," 64 Harv.L.Rev. 968 (1951), cited by defendant. What plaintiff seeks to do is to have us assert jurisdiction over a creditor of a corporate debtor alleged to have violated the proxy rules. What limits on this vague concept would plaintiff have us impose? Surely the spectacle of a courtroom full of bona fide creditors suddenly made party defendants to an Exchange Act proceeding, was foremost in the ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.